Michigan, Indiana vie to attract firms with valuable jobs

Down Interstate 69, just a couple of miles south of the Michigan state line, tiny Fremont, Ind., is basking in a boom. ''Everybody thinks this town is really going to grow,'' says Paul Ruby, standing on a parking lot so new you can smell the asphalt. In the past three years, some seven out-of-state companies have located a plant in Fremont (population: about 1,100). Mr. Ruby is a new employee for the Letica Corporation , which, like most of the other new plants, is from Michigan.

One hundred miles northeast, in the Detroit area, executives of the year-old GMF Robotics company are debating where to put their manufacturing plant.

The plant would mean only 50 to 100 manufacturing jobs initially, but Midwestern communities have plied company executives with everything from financial incentives to jazz-concert tickets and promises to change local school curriculums. Of the eight to 10 communities still in the running, says staff assistant Jim Pelusi, most of them are either in Michigan or Indiana.

These are the latest signs of an emerging Michigan-Indiana border battle for precious jobs. Michigan companies are expanding facilities or relocating altogether in northeastern Indiana - making it the state's fastest growing region in terms of economic development. A month ago, the Detroit Free Press reported that Michigan had supplied some 30 percent of Indiana's new business commitments within the past 2 1/2 years.

This border battle, moreover, is part of a much larger clash of ideas over the proper role of state government in the 1980s.

As anyone can tell you, Michigan and Indiana share common problems. They have skilled and highly paid workers, but continue to lose jobs to the Sunbelt. They were the only two states in the Union to lose population between 1980 and 1982, says Morton J. Marcus, research economist at Indiana University's business school. And both are targeting specific industries in an attempt to revamp their struggling, manufacturing-oriented economies.

But the two states are doing it from opposite ends of an ideological spectrum. On the one hand, Michigan - a traditionally progressive, high-tax state; on the other, Indiana - traditionally conservative with low taxes.

In Michigan, companies appear to be complaining most loudly about the high cost of workers and unemployment compensation, and in some cases, the Single Business Tax, which is computed on the value rather than the profit of a company. (While the tax helps high-profit companies, less well-to-do concerns sometimes can show no profit and still owe money to the state.)

Indiana, with a part-time legislature and no federal debt on unemployment insurance, has the lowest unemployment compensation rate of the Great Lakes states. In the case of workers compensation, it has the lowest rate in the nation. The tax structures between the two are very difficult to compare, outside experts say.

While compensation and taxes seldom play a major role in new location decisions, they could be a decisive factor for Indiana, if other things are equal, says Phillip Phillips, assistant vice-president of the Fantus Company, a Chicago-based site-location consulting company. On the other hand, Michigan may be gaining other jobs as auto-related industries try to locate as close as possible to the auto companies.

Indiana, too, has a mixed picture. Although it boasts low taxes, sources say several companies have not located there because of its poor public schools system. Compared with other states, Indiana ranks low in the amount of money spent per pupil and in the number of high school graduates going on to college. Michigan schools generally rank above national averages.

Which is the more successful model for development? Michigan and Indiana officials agree that it is too early to tell. But some experts predict - there are a few notable exceptions - that the ideal climate lies somewhere between the two. The answer also hinges on what kind of industry is being targeted, they add.

In some ways, Michigan and Indiana are moving closer ideologically.

Although Michigan raised taxes this year, its new governor has moved to reduce government regulations, and slash its deficit, workers-compensation rates , and the huge debt it owes the federal government for unemployment compensation.

''When government is in the way - and in an unnecessary way - we will get out if it doesn't damage the public interest,'' says Peter Plastrik, executive director of the governor's Cabinet Council on Jobs and Economic Development.

Meanwhile, Indiana has quietly raised its sales tax - from 4 to 5 percent - and one of its major corporate taxes. It is also beginning to pay more attention to public education.

Public education likely will be one of the state's major thrusts next year, Lt. Gov. John M. Mutz predicts. ''The governor and I are committed to new investments in what we call human capital. Those investments will have to be accompanied with reform.''

Mr. Mutz says he would welcome an opportunity to work with Michigan on regional development.